---

 

The MainGate MLP Fund had the following performance as of May 31, 2015.

		CUMULATIVE RETURNS						AVERAGE ANNUAL RETURNS
		Inception Date		Fiscal YTD		Since Inception		1 Year		3 Year		Since Inception
MainGate MLP Fund – Class A without load		2/17/11		-0.10%		62.58%		0.25%		15.99%		12.02%
MainGate MLP Fund – Class A with 5.75% maximum front-end load		2/17/11		-5.86%		53.23%		-5.50%		13.71%		10.48%
MainGate MLP Fund – Class I		2/17/11		-0.02%		64.33%		0.46%		16.25%		12.30%
S&P 500 Index		2/17/11		2.97%		72.22%		11.81%		19.67%		13.54%
MainGate MLP Fund – Class C without load		3/31/14		-0.47%		6.58%		-0.50%		N/A		5.61%
MainGate MLP Fund – Class C with 1.00% Contingent Deferred Sales Charge		3/31/14		-1.44%		6.58%		-1.45%		N/A		5.61%
S&P 500 Index		3/31/14		2.97%		15.28%		11.81%		N/A		12.95%

 

Gross Expense Ratio A Shares = 8.04%│Net Expense Ratio A Shares = 1.75% (excluding 6.34% Deferred Income Tax Expense)│Gross Expense Ratio C Shares = 8.79%│Net Expense Ratio C Shares = 2.50% (excluding 6.34% Deferred Income Tax Expense)│Gross Expense Ratio I Shares = 7.79%│Net Expense Ratio I Shares = 1.50% (excluding 6.34% Deferred Income Tax Expense): The Fund’s adviser has contractually agreed to cap the Fund’s total annual operating expenses (excluding brokerage fees and commissions; Class A and Class C 12b-1 fees; borrowing costs; taxes, such as Deferred Income Tax Expense; and extraordinary expenses) at 1.50% of the daily average net assets of each class through March 31, 2016. The performance data shown For Class C with load reflects the Class C maximum deferred sales charge of 1.00%. Deferred income tax expense/(benefit) represents an estimate of the Fund’s potential tax expense/(benefit) if it were to recognize the unrealized gains/(losses) in the portfolio. An estimate of deferred income tax expense/(benefit) depends upon the Fund’s net investment income/(loss) and realized and unrealized gains/(losses) on its portfolio, which may vary greatly on a daily, monthly and annual basis depending on the nature of the Fund’s investments and their performance. An estimate of deferred income tax expenses/(benefit) cannot be reliably predicted from year to year. The 6.34% deferred tax expense represents the performance impact of accrued deferred tax liabilities across the Fund, not individual share classes, for the fiscal year ended November 30, 2014.

 

The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and the principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the information quoted. To obtain performance information current to the most recent month-end please call 855.MLP.FUND (855.657.3863). Performance data shown for Class A shares with load reflects the maximum sales charge of 5.75%. Performance data shown for Class C shares with load reflects the maximum deferred sales charge of 1.00%. Performance data shown for Class I shares does not reflect the deduction of a sales load or fee. Performance data shown “Without Load” does not reflect the deduction of the sales load or fee. If reflected, the load or fee would reduce the performance quoted.

 

The Fund is down slightly fiscal year to date for each share class compared to a broader equity market represented by the S&P 500 that has returned 2.97%. The MLP market has struggled over the past six months with investors worried about the potential impact of lower crude oil prices and higher interest rates from an expected change in monetary policy from the Federal Reserve later this year. Although recent MLP market conditions have been weak, we are optimistic about the future potential.

 

SEMI-ANNUAL REPORT 2015 • 5

 

 

 May 31, 2015 │ unaudited

Assets
Investments in unaffiliated issuers at fair value (cost $1,094,689,791)		$	1,351,526,188
Investments in affiliated issuer at fair value (Note 8) (cost $23,443,617)		$	28,479,000
Cash			47,666,902
Receivable for investments sold			16,325,830
Receivable for Fund shares sold			2,823,543
Prepaid expenses			192,631
Total assets			1,447,014,094
Liabilities
Payable to Adviser			1,428,593
Payable for investments purchased			1,255,620
Deferred tax liability, net			86,613,074
Payable for Fund shares redeemed			1,191,779
Accrued expenses and other liabilities			656,805
Total liabilities			91,145,871
Net assets		$	1,355,868,223
Net Assets Consist of
Additional paid-in capital		$	1,207,442,377
Undistributed net investment loss, net of deferred taxes			(10,440,038	)
Accumulated realized loss, net of deferred taxes			(5,865,637	)
Net unrealized appreciation on investments, net of deferred taxes			164,731,521
Net assets		$	1,355,868,223

Unlimited shares authorized, no par value		Class A				Class C				Class I
Net assets		$	198,218,532			$	38,643,049			$	1,119,006,642
Shares issued and outstanding			15,181,289				2,957,048				84,623,355
Net asset value, redemption price and minimum offering price per share		$	13.06			$	13.07			$	13.22
Maximum offering price per share ($13.06/0.9425)		$	13.85				NA				NA

 

 

December 1, 2014 – May 31, 2015 │ unaudited 

Investment Income
Distributions received from master limited partnerships (includes $587,840 from affiliated issuer (Note 8))		$	23,725,673
Less: return of capital on distributions			(22,776,810	)
Distribution income from master limited partnerships			948,863
Dividends from common stock			5,125,869
Total Investment Income			6,074,732
Expenses
Advisory fees			7,516,882
Administrator fees			356,404
Transfer agent expense			213,046
Registration fees			120,170
Reports to shareholders			96,361
Professional fees			49,600
Custodian fees and expenses			33,633
Trustees’ fees			30,169
Compliance fees			24,650
Insurance expense			18,767
Fund accounting fees			687
Franchise tax expense			106
12b-1 shareholder servicing fee - Class A			233,900
12b-1 shareholder servicing fee - Class C			159,488
Other expenses			9,104
Total Expenses			8,862,967
Plus: expense recoupment by Adviser			394,137
Net Expenses			9,257,104
Net Investment Loss, before Deferred Taxes			(3,182,372	)
Deferred tax benefit			1,897,174
Net Investment Loss			(1,285,198	)
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments in unaffiliated issuers, before income taxes			(10,623,193	)
Deferred tax benefit			3,927,489
Net realized loss on investments in unaffiliated issuers			(6,695,704	)
Net change in unrealized appreciation of investments in unaffiliated issuers, before income taxes			16,646,398
Net change in unrealized appreciation of investments in affiliated issuer, before income taxes			1,584,000
Deferred tax expense			(6,729,541	)
Net change in unrealized appreciation of investments			11,500,857
Net Realized and Unrealized Gain on Investments			4,805,153
Increase in Net Assets Applicable to Shareholders Resulting from Operations		$	3,519,955

12 │ MainGate mlp fund	See Accompanying Notes to the Financial Statements.

 

  

 

		December 1, 2014 – May 31, 2015				Year Ended November 30, 2014
Operations		unaudited
Net investment loss, net of deferred taxes		$	(1,285,198	)		$	(4,196,564	)
Net realized gain (loss) on investments, net of deferred taxes			(6,695,704	)			1,776,044
Net change in unrealized appreciation of investments, net of deferred taxes			11,500,857				92,631,633
Net increase in net assets resulting from operations			3,519,955				90,211,113
Dividends and Distributions to Class A Shareholders
Net investment income			—				(734,199	)
Return of capital			(4,594,858	)			(7,384,671	)
Dividends and Distributions to Class C Shareholders
Net investment income			—				(36,075	)
Return of capital			(786,994	)			(361,111	)
Dividends and Distributions to Class I Shareholders
Net investment income			—				(2,739,744	)
Return of capital			(23,782,682	)			(27,556,716	)
Total dividends and distributions to Fund shareholders			(29,164,534	)			(38,812,516	)
Capital Share Transactions (Note 9)
Proceeds from shareholder subscriptions			451,276,965				868,768,425
Dividend reinvestments			24,396,050				32,210,786
Payments for redemptions			(211,888,188	)			(305,483,060	)
Net increase in net assets from capital share transactions			263,784,827				595,496,151
Total increase in net assets			238,140,248				646,894,748
Net Assets
Beginning of period			1,117,727,975				470,833,227
End of period		$	1,355,868,223			$	1,117,727,975
Undistributed net investment loss at the end of the period, net of income taxes		$	(10,440,038	)		$	(9,154,840	)

See Accompanying Notes to the Financial Statements.	SEMI-ANNUAL REPORT 2015  •  13

 

  

 

Per Share Data(2)		December 1, 2014 – May 31, 2015 unaudited				Year Ended November 30, 2014				Year Ended November 30, 2013				Year Ended November 30, 2012				February 17, 2011(1) – November 30, 2011
Net Asset Value, beginning of period		$	13.39			$	12.00			$	10.37			$	9.76			$	—
Public offering price			—				—				—				—				10.00
Income from Investment Operations
Net investment loss(3)			(0.02	)			(0.09	)			(0.06	)			(0.06	)			(0.05	)
Net realized and unrealized gain on investments			0.01				2.11				2.32				1.30				0.13
Total increase from investment operations			(0.01	)			2.02				2.26				1.24				0.08
Less Distributions to Shareholders
Net investment income			—				(0.06	)			—				—				—
Return of capital			(0.32	)			(0.57	)			(0.63	)			(0.63	)			(0.32	)
Total distributions to shareholders			(0.32	)			(0.63	)			(0.63	)			(0.63	)			(0.32	)
Net Asset Value, end of period		$	13.06			$	13.39			$	12.00			$	10.37			$	9.76
Total Investment Return			(0.10	)%(4)			17.01	%			22.22	%			12.89	%			0.80	%(4)
Supplemental Data and Ratios
Net assets, end of period		$	198,218,532			$	175,523,649			$	127,777,305			$	27,756,364			$	1,769,297
Ratio of waiver (recoupment) to average net assets(5)			(0.07	)%			(0.05	)%			0.04	%			0.41	%			9.31	%
Ratio of net deferred income and franchise tax (benefit) expense to average net assets(6,7)			0.08	%(4)			7.19	%			9.69	%			6.01	%			8.53	%(4)
Ratio of expenses (including net deferred and franchise tax expense) to average net assets before (waiver) recoupment(5,6,7)			1.73	%			8.89	%			11.48	%			8.17	%			19.59	%
Ratio of expenses (including net deferred and franchise tax expense) to average net assets after (waiver) recoupment(5,6,7)			1.80	%			8.94	%			11.44	%			7.76	%			10.28	%
Ratio of expenses (excluding net deferred and franchise tax expense) to average net assets before (waiver) recoupment(5,6,7)			1.65	%			1.70	%			1.79	%			2.16	%			11.06	%
Ratio of expenses (excluding net deferred and franchise tax expense) to average net assets after (waiver) recoupment(5,6,7)			1.72	%			1.75	%			1.75	%			1.75	%			1.75	%
Ratio of net investment loss (including net deferred tax benefit and franchise tax expense) to average net assets before waiver (recoupment) (5,7,8)			(0.49	)%			(0.64	)%			(0.58	)%			(1.04	)%			(9.99	)%
Ratio of net investment loss (including net deferred tax benefit and franchise tax expense) to average net assets after waiver (recoupment) (5,7,8)			(0.56	)%			(0.69	)%			(0.54	)%			(0.63	)%			(0.68	)%
Ratio of net investment loss (excluding net deferred tax benefit and franchise tax expense) to average net assets before waiver (recoupment) (5,7,8)			(0.64	)%			(1.07	)%			(0.99	)%			(1.29	)%			(10.27	)%
Ratio of net investment loss (excluding net deferred tax benefit and franchise tax expense) to average net assets after waiver (recoupment) (5,7,8)			(0.71	)%			(1.12	)%			(0.95	)%			(0.88	)%			(0.97	)%
Portfolio turnover rate(9)			38.67	%(4)			57.83	%			90.59	%			106.26	%			175.43	%(4)

 

14 │ MainGate mlp fund	See Accompanying Notes to the Financial Statements.

 

 

Financial Highlights: Class C Shares
		December 1, 2014–				March 31, 2014(1)–
		May 31, 2015				November 30, 2014
Per Share Data(2)		unaudited
Net Asset Value, beginning of period		$	13.45			$	—
Public offering price			—				13.00
Income from Investment Operations
Net investment loss(3)			(0.07	)			(0.14	)
Net realized and unrealized gain on investments			0.01				1.06
Total increase from investment operations			(0.06	)			0.92
Less Distributions to Shareholders
Net investment income			—				(0.04	)
Return of capital			(0.32	)			(0.43	)
Total distributions to shareholders			(0.32	)			(0.47	)
Net Asset Value, end of period		$	13.07			$	13.45
Total Investment Return			(0.47	)%(4)			7.09	%(4)
Supplemental Data and Ratios
Net assets, end of period		$	38,643,049			$	25,987,231
Ratio of waiver (recoupment) to average net assets(5)			(0.07	)%			(0.05	)%
Ratio of net deferred income and franchise tax (benefit) expense to average net assets(6,7)			0.08	%(4)			2.10	%(4)
Ratio of expenses (including net deferred and franchise tax expense) to average net assets before (waiver) recoupment(5,6,7)			2.48	%			4.55	%
Ratio of expenses (including net deferred and franchise tax expense) to average net assets after (waiver) recoupment(5,6,7)			2.55	%			4.60	%
Ratio of expenses (excluding net deferred and franchise tax expense) to average net assets before (waiver) recoupment(5,6,7)			2.40	%			2.45	%
Ratio of expenses (excluding net deferred and franchise tax expense) to average net assets after (waiver) recoupment(5,6,7)			2.47	%			2.50	%
Ratio of net investment loss (including net deferred tax benefit and franchise tax expense) to average net assets before waiver (recoupment)(5,7,8)			(1.24	)%			(1.58	)%
Ratio of net investment loss (including net deferred tax benefit and franchise tax expense) to average net assets after waiver (recoupment)(5,7,8)			(1.31	)%			(1.63	)%
Ratio of net investment loss (excluding net deferred tax benefit and franchise tax expense) to average net assets before waiver (recoupment)(5,7,8)			(1.39	)%			(1.90	)%
Ratio of net investment loss (excluding net deferred tax benefit and franchise tax expense) to average net assets after waiver (recoupment)(5,7,8)			(1.46	)%			(1.95	)%
Portfolio turnover rate(9)			38.67	%(4)			57.83	%

 

See Accompanying Notes to the Financial Statements.	SEMI-ANNUAL REPORT 2015  •  15

 

 

 

Per Share Data(2)		December 1, 2014 – May 31, 2015 unaudited				Year Ended November 30, 2014				Year Ended November 30, 2013				Year Ended November 30, 2012				February 17, 2011(1) – November 30, 2011
Net Asset Value, beginning of period		$	13.54			$	12.10			$	10.42			$	9.79			$	—
Public offering price			—				—				—				—				10.00
Income from Investment Operations
Net investment loss(3)			(0.01	)			(0.06	)			(0.03	)			(0.04	)			(0.03	)
Net realized and unrealized gain on investments			0.01				2.13				2.34				1.30				0.14
Total increase from investment operations			(0.00	)			2.07				2.31				1.26				0.11
Less Distributions to Shareholders
Net investment income			—				(0.06	)			—				—				—
Return of capital			(0.32	)			(0.57	)			(0.63	)			(0.63	)			(0.32	)
Total distributions to shareholders			(0.32	)			(0.63	)			(0.63	)			(0.63	)			(0.32	)
Net Asset Value, end of period		$	13.22			$	13.54			$	12.10			$	10.42			$	9.79
Total Investment Return			(0.02	)%(4)			17.29	%			22.60	%			13.06	%			1.10	%(4)
Supplemental Data and Ratios
Net assets, end of period		$	1,119,006,642			$	916,217,095			$	343,055,922			$	90,274,137			$	24,126,166
Ratio of waiver (recoupment) to average net assets(5)			(0.07	)%			(0.05	)%			0.04	%			0.41	%			9.31	%
Ratio of net deferred income and franchise tax (benefit) expense to average net assets(6,7)			0.08	%(4)			6.15	%			9.69	%			6.01	%			8.53	%(4)
Ratio of expenses (including net deferred and franchise tax expense) to average net assets before (waiver) recoupment(5,6,7)			1.48	%			7.60	%			11.23	%			7.92	%			19.34	%
Ratio of expenses (including net deferred and franchise tax expense) to average net assets after (waiver) recoupment(5,6,7)			1.55	%			7.65	%			11.19	%			7.51	%			10.03	%
Ratio of expenses (excluding net deferred and franchise tax expense) to average net assets before (waiver) recoupment(5,6,7)			1.40	%			1.45	%			1.54	%			1.91	%			10.81	%
Ratio of expenses (excluding net deferred and franchise tax expense) to average net assets after (waiver) recoupment(5,6,7)			1.47	%			1.50	%			1.50	%			1.50	%			1.50	%
Ratio of net investment loss (including net deferred tax benefit and franchise tax expense) to average net assets before waiver (recoupment) (5,7,8)			(0.24	)%			(0.40	)%			(0.33	)%			(0.79	)%			(9.74	)%
Ratio of net investment loss (including net deferred tax benefit and franchise tax expense) to average net assets after waiver (recoupment) (5,7,8)			(0.31	)%			(0.45	)%			(0.29	)%			(0.38	)%			(0.43	)%
Ratio of net investment loss (excluding net deferred tax benefit and franchise tax expense) to average net assets before waiver (recoupment) (5,7,8)			(0.39	)%			(0.84	)%			(0.74	)%			(1.04	)%			(10.02	)%
Ratio of net investment loss (excluding net deferred tax benefit and franchise tax expense) to average net assets after waiver (recoupment) (5,7,8)			(0.46	)%			(0.89	)%			(0.70	)%			(0.63	)%			(0.72	)%
Portfolio turnover rate(9)			38.67	%(4)			57.83	%			90.59	%			106.26	%			175.43	%(4)

16 │ MainGate mlp fund	See Accompanying Notes to the Financial Statements.

 

 

 

May 31, 2015│unaudited

 

1. Organization

 

MainGate MLP Fund (the “Fund”), a series of MainGate Trust (the “Trust”), is registered under the Investment Company Act of 1940 as an open-end, non-diversified investment company. The Trust was established under the laws of Delaware by an Agreement and Declaration of Trust dated November 3, 2010. The Fund’s investment objective is total return. Class A and Class I commenced operations on February 17, 2011. Class C commenced operations on March 31, 2014.

 

The Fund offers three classes of shares, Class A, Class C and Class I. Class A shares are subject to a maximum 5.75% front-end sales charge. Class C shares have no front-end sales charge, but are subject to a 1.00% contingent deferred sales charge. Class I shares have no sales charge. Class A shareholders pay Rule 12b-1 fees at the annual rate of 0.25% of average daily net assets. Class C shareholders pay Rule 12b-1 fees at the annual rate of 1.00% of average daily net assets.

 

2. Significant Accounting Policies

 

 

B. Investment Valuation. The Fund uses the following valuation methods to determine fair value as either current market value for investments for which market quotations are available, or if not available, a fair value, as determined in good faith pursuant to such policies and procedures as may be approved by the Trust’s Board of Trustees (“Board of Trustees”) from time to time. The valuation of the portfolio securities of the Fund currently includes the following processes:

 

C. Security Transactions, Investment Income and Expenses. Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses are reported on a specific identified cost basis. Interest income is recognized on the accrual basis, including amortization of premiums and accretion of discounts. Distributions are recorded on the ex-dividend date. Distributions received from the Fund’s investments in master limited partnerships (“MLPs”) generally are comprised of ordinary income, capital gains and return of capital from the MLP. Dividends received from the Fund’s investments in MLP general partner interests generally are comprised of ordinary income. The Fund records investment income on the ex-date of the distributions. For financial statement purposes, the Fund uses return of capital and income estimates to allocate the dividend income received. Such estimates are based on historical information available from each MLP and other industry sources. These estimates may subsequently be revised based on information received from MLPs after their tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year end of the Fund.

 

The Fund estimates the allocation of investment income and return of capital for the distributions received from MLPs within the Statement of Operations. The Fund estimates 100% of the distributions from MLPs to be return of capital. Any adjustments to the prior year estimates are recorded in the current period Statement of Operations after actual allocations are known.

 

Expenses are recorded on the accrual basis.

	SEMI-ANNUAL REPORT 2015  •  17

 

 

 

D. Dividends and Distributions to Shareholders. Dividends and distributions to shareholders are recorded on the ex-dividend date. The character of dividends and distributions to shareholders made during the period may differ from their ultimate characterization for federal income tax purposes. For the period ended May 31, 2015, the Fund’s dividends and distributions were expected to be comprised of 100% return of capital. The tax character of distributions paid for the period ended May 31, 2015 will be determined in early 2016.

 

E. Federal Income Taxation. The Fund, taxed as a corporation, is obligated to pay federal and state income tax on its taxable income. Currently, the maximum marginal regular federal income tax rate for a corporation is 35%. The Fund may be subject to a 20% federal alternative minimum tax on its federal alternative minimum taxable income to the extent that its alternative minimum tax exceeds its regular federal income tax.

 

The Fund invests its assets primarily in MLPs, which generally are treated as partnerships for federal income tax purposes. As a limited partner in the MLPs, the Fund reports its allocable share of the MLP’s taxable income in computing its own taxable income. The Fund’s tax expense or benefit is included in the Statement of Operations based on the component of income or gains (losses) to which such expense or benefit relates. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

 

 

F. Cash Distribution Information. The Fund intends to make quarterly distributions from investments, which include the amount received as cash distributions from MLPs and common stock dividends. These activities will be reported in the Statements of Changes in Net Assets.

 

G. Indemnifications. Under the Fund’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund may enter into contracts that provide general indemnification to other parties. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred, and may not occur. However, the Fund has not had prior claims or losses pursuant to these contracts.

  

3. Fair Value Measurements

 

Various inputs that are used in determining the fair value of the Fund’s investments are summarized in the three broad levels listed below:

 

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

These inputs are summarized in the three broad levels that follow.

18 │ MainGate mlp fund

 

 

				Fair Value Measurements at Reporting Date Using:
				Fair Value at				Quoted Prices in Active Markets for Identical Assets				Significant Other Observable Inputs				Significant Unobservable Inputs
	Description			May 31, 2015				(Level 1)				(Level 2)				(Level 3)
	Equity Securities
	Master Limited Partnerships and and Related Companies(1)			$	1,380,005,188			$	1,380,005,188			$	—			$	—
	Total			$	1,380,005,188			$	1,380,005,188			$	—			$	—

  

(1)

All other industry classifications are identified in the Schedule of Investments.

 

The Fund did not hold Level 2 or Level 3 investments at any time during the period from December 1, 2014 to May 31, 2015. There were no transfers into and out of all Levels during the current period presented. It is the Fund’s policy to record transfers between all Levels as of the end of the reporting period.

 

4. Concentrations of Risk

 

The Fund’s investment objective is to seek to generate total return. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its net assets, plus any borrowings for investment purposes, in MLP interests.

 

5. Agreements and Related Party Transactions

 

The Trust has entered into an Investment Advisory Agreement (the “Agreement”) with Chickasaw Capital Management, LLC (the “Adviser”). Under the terms of the Agreement, the Fund pays the Adviser a fee, payable at the end of each calendar month, at an annual rate equal to 1.25% of the average daily net assets of the Fund.

 

The Adviser has agreed to waive its advisory fee and/or reimburse certain operating expenses of the Fund, until at least March 31, 2016, but only to the extent necessary so that the Fund’s total annual expenses, excluding brokerage fees and commissions; borrowing costs (such as (a) interest and (b) dividend expenses on securities sold short); taxes, including deferred and franchise tax expense; any indirect expenses, such as acquired fund fees and expenses; Class A 12b-1 fees, Class C 12b-1 fees, and extraordinary expenses, do not exceed 1.50% of the average daily net assets of each class of the Fund. Any payment by the Adviser of the Fund’s operating, organizational and offering expenses are subject to repayment by the Fund in the three fiscal years following the fiscal year in which the payment was made; provided that the Fund is able to make the repayment without exceeding the 1.50% expense limitation.

 

Waived fees and reimbursed Fund expenses, including prior year expenses, are subject to potential recoupment by year of expiration. The Adviser’s waived fees and reimbursed expenses that are subject to potential recoupment are as follows: 

				Amount				Amount				Amount Subject to				Expiration
	Fiscal Year Incurred			Waived				Recouped (1)				Potential Recoupment				Date
	November 30, 2012			$	112,128			$	112,128			$	0				November 30, 2015
	November 30, 2013				190,901				190,901				0				November 30, 2016
	November 30, 2014				91,108				91,108				0				November 30, 2017
	Total			$	394,137			$	394,137			$	0

 

(1)

Amount recouped was in compliance with the Expense Limitation Agreement, and did not cause the total Fund’s total operating expense ratio (excluding certain expenses, taxes and fees as set forth in the Agreement) to exceed 1.50%.

	SEMI-ANNUAL REPORT 2015  •  19

 

  

 

Certain Trustees and Officers of the Trust/Fund are also Officers of the Adviser.

 

The Fund has entered into a Rule 12b-1 distribution agreement with Quasar Distributors, LLC (“Quasar”). Class A shareholders pay Rule 12b-1 fees at the annual rate of 0.25% of average daily net assets. Class C shareholders pay Rule 12b-1 fees at the annual rate of 1.00% of average daily net assets. For the period from December 1, 2015 to May 31, 2015, 12b-1 distribution expenses of $233,900 and $159,488 were accrued by Class A and Class C shares, respectively.

 

The Fund has engaged U.S. Bancorp Fund Services, LLC to serve as the Fund’s administrator. The Fund pays the administrator a monthly fee computed at an annual rate of 0.10% of the first $75,000,000 of the Fund’s average daily net assets, 0.08% on the next $250,000,000 of average daily net assets and 0.05% on the balance of the Fund’s average daily net assets, with a minimum annual fee of $64,000, imposed upon the Fund reaching certain asset levels.

 

U.S. Bancorp Fund Services, LLC serves as the Fund’s transfer agent, dividend paying agent, and agent for the automatic dividend reinvestment plan. The Fund pays the transfer agent a $45,000 flat fee, imposed upon the Fund reaching certain asset levels, plus transaction and other out-of-pocket charges.

 

U.S. Bank, N.A. serves as the Fund’s custodian. The Fund pays the custodian a monthly fee computed at an annual rate of 0.0075% of the first $250 million of fair value and 0.0050% of the balance, with a minimum annual fee of $4,800, imposed upon Fund reaching certain asset levels.

 

6. Income Taxes

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of a deferred income tax asset will not be realized. From time to time, as new information becomes available, the Fund will modify its estimates or assumption regarding the deferred tax liabilities or assets. Components of the Fund’s deferred tax assets and liabilities as of May 31, 2015, are as follows: 

Deferred tax assets:
Net operating loss carryforward (tax basis)		$	15,699,755
Capital loss carryforward (tax basis)			2,083,006
Other			21,673
Total deferred tax assets			17,804,434
Less: Deferred tax liabilities:
Unrealized gain on investment securities (tax basis), net			(104,417,508	)
Net deferred tax asset (liability)		$	(86,613,074	)

  

The net operating loss carryforward is available to offset future taxable income. The Fund has the following net operating loss and capital loss carryforward amounts:  

 

For corporations, capital losses can only be used to offset capital gains and connot be used to offset ordinary income. The capital loss may be carried forward for 5 years and, accordingly, would begin to expire as of November 30, 2020. The net operating loss can be carried forward for 20 years and, accordingly, would begin to expire as of November 30, 2034.

 

Total income tax expense (current and deferred) differs from the amount computed by applying the federal statutory income tax rate of 35% to net investment income and realized and unrealized gains (losses) on investments before taxes for the period ended May 31, 2015, as follows: 

Total Tax Expense (Benefit)
Tax Expense (Benefit) at Statutory Rates		$	1,548,691
State Income Tax Expense (Net of Federal Benefit)			81,160
Tax Expense (Benefit) on Permanent Items(1)			(724,973	)
Total tax expense		$	904,878

  

(1)	Permanent Items are made up of dividends received deductions.

 

At May 31, 2015, the Fund did not have a current tax expense or benefit.

 

At May 31, 2015, the tax cost basis of investments was $1,099,253,129 and gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows: 

Gross unrealized appreciation		$	284,251,099
Gross unrealized depreciation			(3,499,040	)
Net unrealized appreciation		$	280,752,059

  

The differences between book-basis and tax-basis unrealized appreciation (depreciation) are primarily due to timing differences of income recognition from the MLP investments.

 

The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on U.S. tax returns and state tax returns filed or expected to be filed since inception of the Fund. The November 30, 2013 federal tax return is currently under examination by the Internal Revenue Service. The tax periods since inception remain subject to examination by the tax authorities in the United States. Due to the nature of the Fund’s investments, the Fund may be required to file income tax returns in several states. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

20 │ MainGate mlp fund

 

 

 

7. Investment Transactions

 

For the period ended May 31, 2015, the Fund purchased (at cost) and sold securities (proceeds) in the amount of $1,074,201,996 and $504,764,465 (excluding short-term securities), respectively.

 

8. Investments in Affiliates

 

If a Fund’s holding represents ownership of 5% or more of the voting securities of a company, the company is deemed to be an affiliate as defined in the 1940 Act. The Fund had the following transactions during the period ended May 31, 2015 with affiliated companies: 

VTTI Energy Partners, L.P.
Balance of shares held November 30, 2014			1,100,000
Gross purchases and additions			—
Gross sales and reductions			—
Balance of shares held May 31, 2015			1,100,000
Fair value May 31, 2015		$	28,479,000
Distributions from investments in affiliated issuers		$	587,840
Net realized gain (loss) from investments in affiliated issuers		$	—

  

9. Share Transactions

 

Transactions of shares of the Fund were as follows: 

				December 1, 2014 – May 31, 2015								Year Ended November 30, 2014
	Class A Shares			Amount				Shares				Amount				Shares
	Sold			$	60,756,140				4,694,590			$	177,115,613				13,139,871
	Dividends Reinvested				3,754,828				287,605				6,288,377				474,573
	Redeemed				(37,583,246	)			(2,911,533	)			(153,683,482	)			(11,152,771	)
	Net Increase			$	26,927,722				2,070,662			$	29,720,508				2,461,673
				December 1, 2014 – May 31, 2015								March 31, 2014 (commencement of operations) – November 30, 2014
	Class C Shares			Amount				Shares				Amount				Shares
	Sold			$	14,086,706				1,081,274			$	26,974,384				1,929,203
	Dividends Reinvested				728,892				55,675				322,819				23,497
	Redeemed				(1,453,557	)			(112,172	)			(280,588	)			(20,429	)
	Net Increase			$	13,362,041				1,024,777			$	27,016,615				1,932,271
				December 1, 2014 – May 31, 2015								Year Ended November 30, 2014
	Class I Shares			Amount				Shares				Amount				Shares
	Sold			$	376,434,119				28,674,625			$	664,678,428				48,580,239
	Dividends Reinvested				19,912,330				1,506,838				25,599,590				1,899,323
	Redeemed				(172,851,385	)			(13,235,101	)			(151,518,990	)			(11,157,949	)
	Net Increase			$	223,495,064				16,946,362			$	538,759,028				39,321,613

  

10. Subsequent Events

 

The Fund has adopted standards which establish general standards of accounting for disclosure of events that occur after the Statement of Assets and Liabilities date, but before the financial statements are issued. The Fund has performed an evaluation of subsequent events through the date the financial statements were issued.

	SEMI-ANNUAL REPORT 2015  •  21

 

 

 

May 31, 2015│unaudited

 

Trustee and Officer Compensation

 

The Fund does not compensate any of its trustees who are interested persons nor any of its officers. For the period ended May 31, 2015, the aggregate compensation paid by the Fund to the independent trustees was $30,000. The Fund did not pay any special compensation to any of its trustees or officers. The Fund’s Statement of Additional Information includes additional information about the trustees and is available on the Fund’s Web site at www.maingatefunds.com or the SEC’s Web site at www.sec.gov.

 

Cautionary Note Regarding Forward-Looking Statements

 

This report contains “forward-looking statements” as defined under the U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to materially differ from the Fund’s historical experience and its present expectations or projections indicated in any forward-looking statements. These risks include, but are not limited to, changes in economic and political conditions; regulatory and legal changes; MLP industry risk; concentration risk; energy sector risk; commodities risk; MLP and other tax risks, such as deferred tax assets and liabilities risk; and other risks discussed in the Fund’s filings with the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Fund undertakes no obligation to update or revise any forward-looking statements made herein. There is no assurance that the Fund’s investment objectives will be attained.

 

Proxy Voting Policies

 

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities owned by the Fund and information regarding how the Fund voted proxies relating to the portfolio of securities during the 12-month period ended June 30, 2015 are available to shareholders without charge by visiting the SEC’s Web site at www.sec.gov.

 

Form N-Q

 

The Fund files its complete schedule of portfolio holdings for the first and third quarters of each fiscal year with the SEC on Form N-Q. The Fund’s Form N-Q and statement of additional information are available without charge by visiting the SEC’s Web site at www.sec. gov. In addition, you may review and copy the Fund’s Form N-Q at the SEC’s Public Reference Room in Washington D.C. You may obtain information on the operation of the Public Reference Room by calling (800) SEC-0330.

 

Householding

 

In an effort to decrease costs, the Fund intends to reduce the number of duplicate prospectuses, annual and semi-annual reports, proxy statements and other similar documents you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders that the Transfer Agent reasonably believes are from the same family or household. Once implemented, if you would like to discontinue householding for your accounts, please call toll-free at 855. MLP.FUND (855.657.3863) to request individual copies of these documents. Once the Transfer Agent receives notice to stop householding, the Transfer Agent will begin sending individual copies thirty days after receiving your request. This policy does not apply to account statements.

22 │ MainGate mlp fund

 

  

 

May 31, 2015│unaudited

 

 

At the Trustees’ in-person meeting held on January 12, 2015, the Trustees, including the Trustees who are not “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust or of the Advisor (collectively, the “Independent Trustees”), met to consider the renewal of the Fund’s management agreement with the Advisor for an additional year. All Trustees were present. In advance of this meeting, each Trustee received and reviewed the following materials compiled by the Fund’s administrator, U.S. Bancorp Fund Services, LLC: (i) a letter sent by Trust counsel to the Advisor requesting information that the Independent Trustees likely would consider in determining whether to renew the Fund’s advisory agreement, and the Advisor’s responses, including, among other information, an analysis of the management fees paid by, and the expense ratio of, the Fund compared to its peer group and the average expense ratio of the Fund’s Morningstar group, an analysis of the Advisor’s profitability with respect to its management of the Fund, any changes in advisory personnel, and ideas for future growth for the Fund; (ii) a report by the Advisor describing the Fund’s performance versus the performance of its peers and benchmark index for periods ending November 30, 2014; (iii) the Advisor’s Form ADV; and (iv) a copy of the Advisor’s agreement to continue capping certain operating expenses of the Fund through March 31, 2016. The Trustees also interviewed members of the Advisor’s management, including two of the Fund’s portfolio managers and the Advisor’s chief compliance officer.

 

Some of the factors that figured particularly in the Trustees’ deliberations are listed below, although individual Trustees may have evaluated this information differently, ascribing different weights to various factors. Because the Fund’s management agreement is reviewed and considered by the Board on an annual basis, the Trustees’ determinations may be based, in part, on their consideration of the management agreement in previous years.

 

A. Nature, Extent, and Quality of Services: The Trustees considered that the Advisor provides three experienced portfolio managers to manage the Fund. They noted that Messrs. Mavar and Mead, two of the Portfolio Managers of the Fund and Principals of the Advisor, have been investing clients’ assets in MLPs on a discretionary basis since 1996. The Trustees also noted that the Advisor employs a full time chief compliance officer.

 

B. Fund Performance. The Trustees noted that the returns for the Fund’s Class I shares had outperformed the returns of its peer MLP mutual funds for the year-to-date, one-year, three-year and since inception periods ended November 30, 2014. The Trustees noted that the Fund’s year-to-date and one-year performance as of November 30, 2014 had outperformed its benchmark, the S&P 500 Index. They noted that the Fund’s returns were net of management fees, expenses and deferred tax liability, while the S&P 500 includes no deductions for fees, expenses or taxes.

 

C. Fee Rate. The Trustees considered that the Fund’s 1.25% advisory fee (without reduction for the expense cap) was higher than the advisory fee of the Fund’s MLP peers, but determined that the higher advisory fee was justified based on the expertise and experience of the portfolio managers provided by the Advisor to implement the Fund’s MLP strategy and the Fund’s outperformance of its peers. The Board considered that the advisory fee charged by the Advisor to the Fund is higher than the average advisory fee charged by the Advisor to its private accounts, but determined that the Fund’s higher advisory fee was justified in light of the additional reporting and regulatory requirements applicable to the Advisor on behalf of the Fund. The Board also considered that the Advisor voluntarily had agreed to cap the Fund’s operating expenses since its inception through March 31, 2016.

 

D. Economies of Scale and Profitability. The Trustees considered the Advisor’s representation that it has only recently begun to realize a profit, but has not yet recouped all waived advisory fees, from managing the Fund. The Trustees considered a profitability analysis prepared by the Advisor, which estimated the Advisor’s profitability from its management of the Fund. The Independent Trustees determined that the Advisor’s profitability from managing the Fund, both before and after deduction of marketing expenses, was not excessive.

 

E. Collateral Benefits to the Advisor. The Board considered the Advisor’s representation that it does not enter into any soft dollar arrangements using Fund brokerage commissions to compensate brokers that provide research services to the Advisor, and that the Advisor had not engaged an affiliated broker-dealer to execute portfolio transactions for the Fund.

After reviewing all of the foregoing, and based upon all of the above-mentioned factors and their related conclusions, with no single factor or conclusion being determinative and with each Trustee not necessarily attributing the same weight to each factor, the Trustees, including all of the Independent Trustees voting separately, unanimously determined that the advisory fees paid by the Fund are reasonable, based on the nature and quality of advisory services provided by the Advisor, and unanimously voted to approve the continuation of the management agreement with the Advisor on behalf of the Fund for an additional year.

	SEMI-ANNUAL REPORT 2015  •  23

 

  

 

 

The following is a description of the Fund’s policies regarding disclosure of nonpublic personal information that you provide to the Fund or that the Fund collects from other sources. In the event that you hold shares of the Fund through a broker-dealer or other financial intermediary, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with nonaffiliated third parties.

 

Categories of Information the Fund Collects. The Fund collects the following nonpublic personal information about you:

Categories of Information the Fund Discloses. The Fund does not disclose any nonpublic personal information about its current or former shareholders to unaffiliated third parties, except as required or permitted by law. The Fund is permitted by law to disclose all of the information it collects, as described above, to service providers (such as the Fund’s custodian, administrator, transfer agent, accountant and legal counsel) to process your transactions and otherwise provide services to you.

 

Confidentiality and Security. The Fund restricts access to your nonpublic personal information to those persons who require such information to provide products or services to you. The Fund maintains physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information.

 

Disposal of Information. The Fund, through its transfer agent, has taken steps to reasonably ensure that the privacy of your nonpublic personal information is maintained at all times, including in connection with the disposal of information that is no longer required to be maintained by the Fund. Such steps shall include, whenever possible, shredding paper documents and records prior to disposal, requiring off-site storage vendors to shred documents maintained in such locations prior to disposal, and erasing and/or obliterating any data contained on electronic media in such a manner that the information can no longer be read or reconstructed.

24 │ MainGate mlp fund

 

 

 

May 31, 2015

 

Board of Trustees

 

Geoffrey P. Mavar*, Chairman of the Board

Robert A. Reed, Lead Independent Trustee

David C. Burns, Independent Trustee

Moss W. Davis, Independent Trustee

Marshall K. Gramm, Independent Trustee

Matthew G. Mead*, Interested Trustee

Barry A. Samuels, Independent Trustee

Darrison N. Wharton, Independent Trustee

 

Officers

 

Matthew G. Mead*, President and Chief Executive Officer

Geoffrey P. Mavar*, Treasurer and Chief Financial Officer

Gerard Scarpati, Chief Compliance Officer

Debra McAdoo*, Secretary

 

Investment Adviser

 

Chickasaw Capital Management, LLC 

6075 Poplar Avenue, Suite 720, Memphis, TN 38119

 

Distributor

 

Quasar Distributors, LLC 

615 East Michigan Street, Milwaukee, WI 53202

 

Custodian

 

U.S. Bank, N.A. 

1555 N. River Center Drive, Suite 302, Milwaukee, WI 53212

 

Transfer Agent

 

U.S. Bancorp Fund Services, LLC 

615 East Michigan Street, 3rd Floor, Milwaukee, WI 53202

 

Administrator

 

U.S. Bancorp Fund Services, LLC 

777 East Wisconsin Street, 5th Floor, Milwaukee, WI 53202

 

Legal Counsel

 

Thompson Coburn LLP 

One U.S. Bank Plaza, St. Louis, MO 63101

 

Independent Registered Public Accounting Firm

 

Cohen Fund Audit Services, Ltd.

1350 Euclid Avenue, Suite 800, Cleveland, OH 44115 

 

*Employed by Chickasaw Capital Management, LLC.

	SEMI-ANNUAL REPORT 2015  •  25

 

 

 

Notes 

26 │ MainGate mlp fund

 

 

 

Notes 

 

 

Mutual fund investing involves risk. Principal loss is possible.	Must be preceded or accompanied by a prospectus.
BACK COVER │ NOT PART OF REPORT	Quasar Distributors, LLC, distributor.

 

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